Trump’s Trade War 2.0
trade-wars
Trump’s new 25% tariffs on Canada and Mexico and 10% on China, modelled to cut Mexican and Canadian exports by up to a quarter, with oil imports the key exposure.
Trump’s new tariffs take effect February 1, 2025: 25% on Canada and Mexico, 10% on China. Structural gravity modelling suggests these could cut Mexican and Canadian exports by 24–26% even without retaliation, with steeper losses if the two countries retaliate. Oil imports are flagged as a particular vulnerability — Canada supplies the US with more than 4 million barrels a day, and a 25% tariff risks a real jump in gas prices. The tariffs are framed as serving objectives beyond trade policy, including immigration control and reducing fentanyl trafficking, marking a shift toward using trade policy as a foreign-policy lever.
Originally published on Substack, January 31, 2025.